German MPs to demand veto as highest court rules on legality of Greek bailout

Germany's highest court is to rule that the Bundestag should have the final
say over the national budget - a judgment that could paralyse the ability of
the EU to respond quickly to the deepending euro crisis.

Chancellor Angela Merkel is losing public support as Germany is forced to back larger bail-outs for Greece Photo: GETTY

The Karlsruhe court rules today on the legality of the Greek bailout and the creation of a £386billion euro rescue fund. Judges in the court are not expected to declare measures taken to save eurozone last year as illegal under EU treaties and national law. But they are widely tipped to rule that the Bundestag parliament should be given the final say.

Such a judgement would make it much more difficult for the EU to move swiftly on new bailouts or the purchase of bonds to help struggling governments and banks during the current turmoil on European financial markets, a development that is expected to further rattle investors.

European shares continued to fall yesterday, reversing earlier gains, ahead of the constitutional ruling.

"More parliamentary democracy is clearly a good thing, but a stronger say for the Bundestag over the bailouts will also further limit EU leaders' room for manoeuvre when dealing with the crisis, which in turn could increase market uncertainty," said Pieter Cleppe, of the Open Europe pressure group.

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German MPs will be increasingly reluctant to approve future bailouts because the popular backlash against the euro rescue fund, which created a potential liability of £73billion for the German federal budget, has led to six successive regional election defeats for Angela Merkel, the German Chancellor.

The judgement will also be closely watched because the constitutional court could set limits or interest rate conditions on future German contributions to individual bailouts or the current moves towards fiscal union with a European Monetary Fund and Eurobonds.

MPs in the German Chancellor's own ruling Christian Democrats and its coalition partner, the Free Democratic Party, have already drafted proposals to give the Bundestag far-reaching veto rights over euro rescues.

During talks on Monday night, the Chancellor Merkel failed to find a majority within her coalition for measures, agreed at an EU summit in July, to beef up the euro zone rescue fund allowing it to intervene on bond markets.

She is expected to finally win the vote to be held on September 29 but will have to concede a veto to MPs.